About 2 years ago I got really sick of paying rent. I live in Sydney, Australia, where house prices are ridiculous. My rent was continually increasing up until the beginning of 2008 where interest rates started to fall really quickly due to the global financial crises.
At that time I was really interested in learning everything about financial independence. I was reading like crazy. I read a book called the Science of Getting Rich about 3 times in a week and I was also reading Robert Kiosaki's books really quickly. I wanted to take control of my finances.
My job was going really well and my pay had increased a total of AU$42,000 in a period of 12 months (to find out how click here). At the time I had a bit of debt but it was serviceable.
I started looking around for more affordable places that I could own a home. At the same time I was reading about several advices on whether to own a home or not. The advices were not consistent depending on what book I picked up so I realised that, REALLY, no one has an answer that makes sense. Following are the advices I got:
- Your own home is not an asset (I agree with this) unless you can make money from it. So don't buy one until you are free from debt and well on your way to financial independence (I disagree with the second half of this advice).
- Rent is dead money, you are paying someone else's mortgage. Therefore it is better to own your own home and pay your own mortgage rather than someone else's.
- Only buy a home if it puts money in your pocket to help paying the mortgage. Buy places that have granny-flats attached to the house so you can rent out the granny-flat and use the money to pay the mortgage (I agree with this but it is hard to execute).
With regards to affordability, I could not afford to buy a home in Sydney where I wanted because when interest rates were low the mortgage would a be about 1 and half times the amount I was paying in rent. Because interest rates were low I know they were going up so the answer was no, not to buy in Sydney.
I started looking at satellite suburbs and we found a home about 1 and 1/2 hours from my work in Sydney. This did not stop us from buying it. It has been about 2 years since we have moved and though I get tired of commuting, every time I pay the mortgage I know that I am putting money in my own pocket and, in the long term, it will benefit myself and my family.
The road towards financial independence is not easy, there are many sacrifices to be made and we decided to sacrifice my time for the long term benefit of owning our own house.
We also know that this situation is temporary until we finish paying a bit of debt that we have and the situation changes. At that point we hope to keep this house as an investment property and buy another property for us about 1 hour from my work.
That is the goal for about 3 years from now. We will work towards it with the steadfast knowledge that we can do it. With this attitude and working hard we know we will achieve it.